Were pre-approval typing and composition charges taxable when a stenographer later produced ditto or mimeograph copies of architects' specifications?

Plain-English summary

A taxpayer organized architects' rough figures and typed stencils and carbons, then waited for the architects' approval before running ditto or mimeograph copies. The memorandum says ordinary typing by a public stenographer was treated as a nontaxable service; the live annotation identifies this taxpayer as a public stenographer.

The memorandum reports Tax Counsel E. H. Stetson's view that the pre-approval work might be treated as nontaxable service, whether or not the taxpayer later produced the finished copies. It compared the work to preliminary art, reproduction proofs, and ordinary public-stenographer typing.

The staff recommended that a reaudit delete charges for services performed before copies were run. The PDF does not show that the reaudit occurred or supply a revised tax or later disposition. The live annotation separately says the taxpayer billed the services separately and architects reviewed the work for two weeks to one month, but those facts do not appear in the supporting memorandum.

Citations and references

• California Sales and Use Tax Ruling 2, described as exempting preliminary art when photographers and artists prepare a composition for client approval before the finished product — as cited; text, version, adoption history, and copy not reproduced in the official PDF
• California Sales and Use Tax Ruling 24 and unnamed “appropriate bulletins,” described as exempting reproduction proofs even when used to produce a finished product — as cited; bulletin identities, texts, versions, adoption histories, and copies not reproduced in the official PDF
• July 2, 1964 Board meeting whose expressed wishes the proposed reaudit would follow — agenda, minutes, participants, motion, vote, taxpayer-specific direction, and resulting action not reproduced in the official PDF
• July 3, 1964 tax-counsel letter suggesting a reaudit and a July 19, 1964 conversation with Tax Counsel E. H. Stetson after counsel spoke with the auditing recipient — letter, conversation records, complete facts, tax period, charges, workpapers, invoices, and copies not reproduced in the official PDF
• July 20, 1964 Tax Counsel memorandum reporting Stetson's view that pre-approval composition, stencil, and carbon work might be nontaxable whether or not the taxpayer later made copies, and recommending deletion of pre-copy charges on reaudit — no completed reaudit, taxpayer response, revised tax, assessment, petition, appeal, Board action, or later outcome supplied
• Official Annotation 295.1660's public-stenographer, architects'-specifications, preliminary-work, approval, separate-billing, two-week-to-one-month review, and July 20, 1964 rules — annotation states the conclusion categorically and adds separate-billing and review-delay facts absent from the supporting memorandum; it omits the prior letter and conversations, authorities and unnamed bulletins, recommendation-only posture, Board-meeting reference, later outcome, and reliance status and supplies no additional proceeding record

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-1660.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

West Los Angeles - Auditing

From:

Tax Counsel {JHK}

Subject:

"T"

295.1660

Date:

July 20, 1964

I conferred with Mr. E. H. Stetson yesterday after talking to you about the problems involved in performing a reaudit along the lines suggested in my letter of July 3, 1964. Mr. Stetson felt that since the taxpayer waited for the architects' approval as to the composition of the figures prior to producing any mimeographed copies, the work of preparing the rough figures into appropriate form and the typing of stencils and carbons might be considered nontaxable services. It was his feeling that this is true whether or not the taxpayer produced mimeograph or ditto copies for the architects after obtaining their approval. Several rulings are analogous and all treat the work performed by the taxpayer as nontaxable services. Ruling 2 exempts preliminary art as a nontaxable service where photographers and artists make up a composition for approval by the client prior to the production of the finished product. Ruling 24 and appropriate bulletins exempt reproduction proofs even though they are utilized in the production of a finished product. Finally, the typing by a public stenographer is considered a service not subject to sales tax. Therefore, it is the staff's recommendation that the reaudit be accomplished by deleting charges for services performed prior to the running of the copies by the ditto or the mimeograph machines. This will reduce the amount of tax substantially and will be in conformity with the wishes of the Board expressed at their meeting of July 2.

JHK:md [lb]